Brains, sweat, luck pay off

FleetBoston's Somes wins February contest

WASHINGTON (CBS.MW) -- The best economic forecasters in the business rely on a careful mix of economic modeling, judgment and luck, says Geoffrey Somes, senior economist for FleetBoston Financial and the winner of the CBS MarketWatch Forecaster of the Month award for February.

Somes beat 33 of his colleagues to win the award. His forecasts on 10 key monthly economic indicators released in February were the best of the bunch overall.

MarketWatch instituted the contest to recognize the economists who do the best job of forecasting the market's most influential pieces of statistical data.

"Part of the game in forecasting is to try to be better than everyone else, obviously," Somes said. "In forecasts you are going to be wrong a lot of the time but you are just trying to be less wrong than other people."

Somes has been at FleetBoston for five-and-a-half years. He earned his Ph.D. at Boston College after a stint working at the Treasury Department in Washington.

Somes said that after he plugs in all the available data into his econometric models, judgment is the crucial element in crafting his forecasts.

"There is a certain amount of judgment," he said. "These numbers would be meaningless unless I didn't apply some judgment."

"I have to give a reality check" to see if the number "passes the grin test. Sometimes these numbers simply don't."

"Finally, the last piece is luck," he said. The monthly numbers are so volatile, with so many opportunities for analytical error, measurement error that "you just cross your fingers and hope you get it right," he said.

"The underlying strength of the rest of the retail sector will come through" in the February data, he said. "Despite the fact that the labor market remains poor, folks continue to spend, which is obviously good news for the economy over the near term."

The retail sales data will be released Thursday. Somes is predicting a 0.5 percent increase.

In the February contest, Somes beat out some tough competition, including past winners Allen Sinai of Decision Economics and Maury Harris of UBS, who tied for second place. Other runners up in February were Stuart Hoffman of PNC National Bank and Michael Moran of Daiwa Securities.

Somes' forecasts for the consumer price index, new-home sales and personal income growth were the best of 33 forecasts. All told, he ranked in the top 10 on seven of the 10 indicators tracked by the contest.

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